UBS, Goldman, BofA: Banks continue to push gold

UBS says gold’s uptrend “has legs” and will “see further gains over the next couple years.”

Goldman Sachs is targeting $2,700 an ounce by early 2025 due to gold’s status as a hedge against risk.

In the precious metals market — it’s hard to find a bear right now.

‘Commodity bull is just starting’

Bank of America strategist Jared Woodard is expecting a steep rise in inflation for the foreseeable future. Inflation has remained at the Fed’s target of around 2% for two decades until recent years, a trend that could soon revert to trends seen before the 2000s, when prices rose at an average of about 5%, Woodard wrote.

Commodities would be one of the best places to store value if this scenario plays out, and Woodard said that the “commodity bull is just starting.”

The bank expects commodities to generate annualized returns of about 11% as “debt, deficits, demographics, reverse-globalization, AI and net zero policies are all inflationary.”

The report recommends investors consider a 40% allocation of commodities over bonds, given the global economic climate.

Gold and silver have been some of the top performers in commodities this year, though there have been underperforming assets, such as WTI crude oil, which is trading at similar levels to two years ago.

Goldman says go for gold

In a Monday note titled “Go for Gold,” Goldman analysts revised its $2,700 an-ounce call for gold to happen by early 2025 instead of the previously predicted end of 2024.

Analysts cited a “price-sensitive China market” as one of the top reasons for the revision but also said the metal has a strong future for the same reason.

“We believe that the same price sensitivity also insures against hypothetical large price declines, which would likely reinvigorate Chinese buying,” the report states.

But Goldman did embrace an all-out commodities bull stance, noting it is bearish on Zinc and oil prices. Last week, the bank reduced its Brent forecast in 2025 by $5 per barrel due to decreasing Chinese demand.

UBS says policy easing is a plus

UBS noted that the expected drop in the Federal Funds Rate will likely be bullish for gold, as the precious metal has seen about an average of 9% gains over the first two quarters following a cut.

UBS is bullish on gold but said a hawkish Fed pivot could spell doom for prices. A stronger dollar is also a concern if it were to happen, the bank’s note stated.

But until those indicators were to happen, the bank cited resilient consumer demand, reserve bank holdings being low compared to weighted averages, elevated macro uncertainty with the 2024 U.S. election, and persistent geopolitical risks as top reasons for holding gold.